16. Global economic performance improved during the third and fourth quarters of 2009, prompting the IMF to reduce the projected rate of economic contraction in 2009 from 1.1 per cent made in October 2009 to 0.8 per cent in its latest World Economic Outlook (WEO) Update released on January 26, 2010. The IMF has also revised the projection of global growth for 2010 to 3.9 per cent, up from 3.1 per cent. The IMF expects the growth performance, which will be led by major Asian economies, to vary considerably across countries and regions, reflecting different initial conditions, external shocks, and policy responses.

17. The IMF has also revised upwards its projection of the real GDP growth of emerging and developing economies for 2009 to 2.1 per cent from its earlier number of 1.7 per cent. The estimates are even more optimistic for 2010. The growth of emerging and developing economies is now projected at 6.0 per cent, up from 5.1 per cent earlier. The growth in EMEs such as China and India and other emerging Asian economies is expected to be robust. Commodity-producing countries are likely to recover quickly in 2010 on the back of a rebound in commodity prices.

Global Inflation

18. The IMF expects that the high levels of slack in resource utilisation and stable inflation expectations will contain global inflationary pressures in 2010. In the advanced economies, headline inflation is expected to increase from zero in 2009 to 1.3 per cent in 2010, as rising energy prices may more than offset deceleration in wage levels. In emerging and developing economies, inflation is expected to rise to 6.2 per cent in 2010 from 5.2 per cent in 2009 due to low slack in resource utilisation and increased capital inflows.